Home Prices Have Surged 42% in the Last 3 Years
A slowdown is now underway, says NAR Chief Economist Lawrence Yun. But don’t expect to see dramatic price drops.
After three years of runaway home prices, buyers may soon find relief. In some markets, they may have already found it.
The National Association of REALTORS®’ latest quarterly housing report shows that home price growth is cooling—though that doesn’t mean prices are falling. The national median price for a single-family existing home rose 4% in the fourth quarter of 2022, reaching $378,700. That’s a much slower pace than the 8.6% increase in the previous quarter. Further, only 18% of metro markets posted double-digit price gains in the fourth quarter of 2022, compared to 46% in the previous quarter, NAR data shows.
“A slowdown in home prices is underway and welcomed, particularly as the typical home price has risen 42% in the past three years,” says NAR Chief Economist Lawrence Yun. Still, “even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of markets due to extremely limited supply. Moreover, there are signs that buyers are returning as mortgage rates decline, even with inventory levels near historic lows.”
Still, about one in 10 markets saw home price declines in the fourth quarter of 2022. What’s more, “a few markets may see double-digit price drops, especially some of the more expensive parts of the country, which have also seen weaker employment and higher instances of residents moving to other areas,” Yun says.
Home buyers may be holding out for bigger price drops. Rising home prices have far surpassed median wage increases, and higher inflation and mortgage rates also are hampering home affordability. The typical monthly mortgage payment on an existing single-family home with a 20% down payment reached $1,969 in the fourth quarter of 2022—a 58% increase compared to a year earlier, according to NAR. That said, mortgage rates have been inching down since the beginning of the year.
The South had the largest share of single-family existing-home sales of any U.S. region and posted year-over-year price appreciation of about 5%, according to NAR. Prices climbed 5.3% in the Northeast, 4% in the Midwest and 2.6% in the West during the fourth quarter of 2022. The following 10 metro areas saw the largest year-over-year price increases in the fourth quarter of 2022, with seven of those markets in Florida or the Carolinas:
- Farmington, N.M.: 20.3%
- North Port-Sarasota-Bradenton, Fla.: 19.5%
- Naples-Immokalee-Marco Island, Fla.: 17.2%
- Greensboro-High Point, N.C.: 17%
- Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C.: 16.2%
- Oshkosh-Neenah, Wis.: 16%
- Winston-Salem, N.C.: 15.7%
- El Paso, Texas: 15.2%
- Punta Gorda, Fla.: 15.2%
- Deltona-Daytona Beach-Ormond Beach, Fla.: 14.5%
Overall, the 10 priciest markets in the fourth quarter of 2022 (which were mostly in California), according to NAR’s report, are:
- San Jose-Sunnyvale-Santa Clara, Calif.: $1.58 million; down 5.8%
- San Francisco-Oakland-Hayward, Calif.: $1.23 million; down 6.1%
- Anaheim-Santa Ana-Irvine, Calif.: $1.13 million; down 1.6%
- Urban Honolulu, Hawaii: $1.1 million; up 3.4%
- San Diego-Carlsbad, Calif.: $857,000; up 1.4%
- Los Angeles-Long Beach-Glendale, Calif.: $829,100; down 1.3%
- Naples-Immokalee-Marco Island, Fla.: $802,500; up 17.2%
- Boulder, Colo.: $759,500; down 2%
- Seattle-Tacoma-Bellevue, Wash.: $708,900; up 1.3%
- Barnstable, Mass.: $668,100; up 4%